Experts say that Amazon's, Microsoft's, and Google's clouds are 'some of the most resilient' to any kind of economic downturn amid the coronavirus crisis
- Analysts say Amazon Web Services, Microsoft, and Google Cloud will likely see little impact to their businesses from the current coronavirus-driven economic downturn.
- More companies are requiring employees to work remotely to help limit the spread of the virus, which could bring more opportunity for cloud providers, analysts say.
- Analysts say Google Cloud and Microsoft in particular benefit from having work productivity applications that can help companies as they work remotely, while AWS has more name recognition.
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The coronavirus crisis is ravaging the stock markets as businesses shut down or figure out how to work remotely. But cloud providers, particularly Amazon Web Services, Microsoft, and Google Cloud, should be relatively safe from this turmoil, experts say.
Of note is that the cloud wasn't nearly as close to the mainstream during the last financial crisis as it is today, so the current economic downturn as a result of coronavirus could set the precedent for how cloud providers fare during turmoil.
But Alex Zukin, managing director at RBC Capital Markets, says the cloud providers are "some of the most resilient pieces of business" in the tech industry.
Many businesses already run some of their most crucial apps behind the scenes on the cloud, where they can simply buy more computing capacity when they need it, instead of having to set up more data centers themselves, as Zukin notes.
That's good news for the mega-clouds like AWS, who are likely to both keep their existing customers, and find new ones, as they look to cloud computing as a way to save on data center and server costs amid the turmoil. While the overall tech industry may slow down, the cloud providers will likely be just fine.
"Ultimately the trend towards cloud computing is not going to get dramatically slowed by coronavirus," David Heger, senior analyst at Edward Jones, told Business Insider. "Companies are increasingly trying to move applications out of their data centers into the cloud model."
Cloud vendors are 'well-positioned' for remote work
One direct effect of the coronavirus crisis is that more companies, including giants like Apple and Amazon, have been forced to have most of their employees work remotely.
That's a net positive for AWS, Microsoft, and Google Cloud, analysts say: Those newly-remote workers are relying on tools like Zoom, Asana, and Slack to stay organized and collaborate with their team from a distance. Those tools, in turn, are hosted at least partially on AWS, which means that it'll benefit from the heightened demand.
This dynamic stands to bolster the cloud providers' revenue as more workers stay home, says Jeb Su, principal analyst at Atherton Technology Research.
"People are using their infrastructure more," Su told Business Insider. "Obviously that would translate to higher revenues and higher usage...The impact of the pandemic is there's more usage on cloud providers' infrastructure."
Sanjeev Mohan, senior director analyst at Gartner, says cloud companies are "already well-paced" for customers working remotely.
"From a customer usage aspect, the cloud vendors are already really well-positioned," Mohan said. "They further strengthen their value proposition which is to provide value-added services in the cloud as opposed to people having to rely on internal networks and hardware. This entire coronavirus thing can cause a bigger push to the cloud."
What's more, Mohan says that as local governments worldwide impose restrictions on movement to help control the spread of the coronavirus, it could mean that companies lose access to their physical data centers. For those customers who aren't constrained by industry-specific rules, like healthcare's HIPAA regulations, it could light the spark for those companies to make a move.
"This virus provides the impetus," Mohan said. "Those who were not constrained by strict regulations were [on premise] trying to figure out, should we or should we not go to the cloud, will now start going towards the cloud."
Google is vulnerable
In general, analysts say that there will be little differences between how each of the three major clouds would get impacted by an economic downturn, but they do point to some differences.
For example, Microsoft has more traditional enterprise customers with contracts that can last many years, which helps protect against the possibility of customers pulling their spending. Ray Wang, founder and principal analyst of Constellation Research, also says Microsoft has the benefit of being able to package its other software, like Microsoft Office and Teams, with services from the Azure cloud, meaning that one can bolster the other.
Similarly, Google has G Suite, which can help companies collaborate and get more work done remotely. With schools all over the world getting canceled, and classes getting moved online, the situation can be a help Google's business as more students use Google's G Suite and video conferencing software, Wang says.
Martin Wolf, president and founder of advisory firm martinwolf, predicts that Google Cloud will be less impacted because it's still small enough compared to AWS and Microsoft that it has the least to lose.
AWS, on the flipside, has more and larger customers, meaning that it's actually more exposed - if customers in heavily-vulnerable sectors like travel and entertainment pull their cloud spending amid the coronavirus crisis, it could be bad news for Amazon's bottom line.
"Depending on their customer profile, some industries are at great risk," Wolf said.
Still, because AWS has been in the cloud business the longest of the three, it will have a name-recognition advantage when it comes to gaining new customers that Google Cloud especially doesn't, Heger says.
Under CEO Thomas Kurian, Google Cloud has been upping its sales game by hiring more salespeople and selling to specific industries, but it still needs to prove itself to get a bigger place at the table, Heger says. On top of that, there's the challenge of winning deals when salespeople can't travel and meet with customers face to face.
'It wouldn't have an impact on the cloud'
In general, though, the cloud business is a stronghold that could fortify the financials of each company, no matter what else happens, says Andrew Bartels, vice president and principal analyst at Forrester. A slowdown in consumer spending could negatively impact Amazon's retail business, for instance, but it likely won't impact AWS.
The same goes for Microsoft and Google, with the possibility of Microsoft's hardware business and Google's advertising business being impacted. But Microsoft Azure and Google Cloud likely won't see a dent in their businesses, Bartels says.
"Even if they were impacted by the recession, it wouldn't have an impact on the cloud," Bartels told Business Insider.
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